Beyond just being a store, wherever it opens its doors, Hot Topic strives to create a community for young people, with a vibrant social media presence and a seeming ability to pivot its offerings to the next trend or obsession among its newest crop of customers as the previous generation ages out. If you are part of this community, you feel welcome and will hang out for hours, getting to know the store staff, meeting people with the same fan obsessions, browsing merchandise you can’t find anywhere else in the mall, and feeling part of a worldwide community that likes the things you like, which people in your hometown typically don’t understand or care about. The kids who frequent these stores most likely don’t know it, but Hot Topic is an example of a brand that thrives on the community model; a business built on humans’ natural desire to find like-minded individuals.

SoulPsychos

Do not fall into the trap of thinking that the community model is about segmentation or demographics. That’s a fool’s errand in the retail world. These consumers will continue to move like agitated electrons when you try to pin them down or put them into a customer segment. Rather, these consumers—at a particular point in time, from a wide variety of backgrounds, for a wide variety of reasons—find themselves drawn to a brand, a look, a spirit, a location, an ethos, or something even more difficult to describe. But the true root of this is that individuals are drawn to a sense of belonging to something, whatever that may be. The community retailer is putting into the marketplace a product, service, and experience that together create a feeling of being part of something that matters to its set of customers, whether that is sustainability through companies that upcycle gently used clothing or the zealous members of SoulCycle (whom I refer to as “SoulPsychos”), where stationary biking with a slight spiritual twist seems to be just the ticket.

Yet it’s a fine line between a community and a random bunch of people who have an affinity for a particular brand. Take sneakers, for example. Nike and Adidas have legions of loyal customers: people who just prefer a brand’s shoes for a particular look or fit. But loyalty to the brand is not the point. There are also true sneakerheads who live and breathe collectible sneaks with entire closets, even storage units, full of every flavor of special kicks, just as there are wine buffs who have cellars at home and speak the same language of woody notes and berry finishes. These consumers are drawn to companies that follow the community model not only because of these companies’ products but also because of these companies’ passion and commitment to something that surrounds their products—whether that “something” is an idea, a value, a lifestyle, or a particular emotion. But if you look closely, belonging to the community is often the only thing the customers in this model have in common.

An example of a company that focuses on community is Chewy which has built intense loyalty around its community of pet lovers. It goes as far as to scan customers’ social media to see what is going on in their lives as pet owners. If someone’s animal dies, Chewy sends a condolence letter. Chewy has a “giveback” tab on its home page that takes you to a whole list of shelters and animal rescue programs across the country that its customers can give to, with a shelter and rescue finder in their neighborhoods, where they can volunteer or donate directly.

Chewy breaks it down with individual stories of pets rescued and shelters helped with Chewy’s $62 million–worth of product donations, such as the 100,000 pounds of pet supplies sent out to support the 800,000 or so federal government workers who were furloughed during the pandemic lockdown in the United States.

For pet-loving consumers who are actively involved in animal causes, Chewy invites them to plug into their own network of organizations and resources, so that they can expand their own reach. There are no limits to this pet-loving identity (unless you don’t like pets).

Chewy could even build on it from a product standpoint and sell products like apparel and food for humans. When the community is strong enough, there are many ways to scale.

Another important binding agent for building a successful retail company based on the community model is a sense of being part of something bigger than yourself. There’s nothing more effective at making customers feel good about themselves and your brand than giving back in some way, whether through something as small as forgoing the return of an item if you donate it to a cause or buying items made from sustainably sourced or upcycled material.

Otherwise known as circular fashion, there’s a large and growing movement toward recycled retail or sustainable products that have been manufactured to have the lowest-possible impact on the environment. Companies such as Allbirds and Rothy’s (which makes sneakers from recycled materials) have gained a loyal following.

They’re facing competition from such companies as Cariuma in Brazil, which uses only organic, fair-trade materials, whether that’s rubber from natural and sustainably farmed rubber trees or leather sourced from areas that were not deforested for cattle farming. Cariuma ships shoes in the shoe box with no other packaging, to eliminate waste, and it purchases carbon offsets for shipping. Startup Nothing New makes sneakers out of recycled material exclusively and promotes recycling by offering $20 discounts on new pairs when its customers send in their used shoes to be either cleaned and donated or broken down and used again for production material. And there are hundreds more like these.

Today’s consumers—especially though not exclusively Millennials and Gen Zers—are becoming acutely aware of the havoc the fashion industry has been wreaking on the environment. Next to the oil industry, it is the largest polluter in the world due to its long supply chains and energy-intensive production methods, spewing 2.1 billion tons of global carbon emissions in 2018 alone, according to a report by Global Fashion Agenda. It’s responsible for 10 percent of greenhouse gas emissions and 20 percent of global wastewater, according to the United Nations.

The amount of fabric that’s wasted in factories and of discarded clothing that goes into landfills is truly staggering. Anyone who has ever stood in a Goodwill distribution center understands the need for circular fashion. Even Goodwill can’t process the sheer volume of garments pouring in, much of which ends up compressed into bails and chopped into chunks, destined for rag factories.

Passion For Trashion

Enter thredUP, an online consignment and thrift store “for you, your wallet, and the planet” that has created an online community of Consumers looking to buy secondhand fashion for women and children (for now, but you can be sure it will enter the men’s market at some point). It’s become a leading platform in a $50 billion and growing resale economy, with millions of Consumers able to shop more than 45,000 different brands at prices discounted up to 90 percent.

It takes the work out of sending used or unwanted clothing out for consignment (convenience). The consumers who want to make room in their closets just have to download the app and request a kit. When they fill up their bags, the San Francisco–based thredUP sends a shipping label, and when the items are quality checked, approved, and sold, the user can take either cash or a thredUP store credit.

These customers can also choose simply to recycle their old clothes, for which thredUP donates $5 to the nonprofit Circular Fashion Fund. Meanwhile, buyers can choose anything from top designer brands in mint condition to “Rescues,” for those customers who are willing to give more damaged garments some TLC.

The company’s secret sauce, the reason it’s able to practice “re-commerce” with such efficiency and at such scale, is its technology. The company has invested heavily in the design of a resale engine, logistics, and infrastructure, allowing it to handle more than 100 million garments from closets across America. It uses AI to process incoming items through image recognition, enabling it to almost instantaneously tag the origin of a piece of clothing based on its pattern, label, color, and styling and assign a fair resale value based on wear and tear. ThredUP also uses technology to bring some personalization to its service. However, personalization without the physical intimacy of face-to-face interactions is just guessing.

Based on past uses, predictive analytics, and trend data, thredUP’s sustainable stylist handpicks 10 items for its individual members (curation) through its Goody Box service—an enhanced curation without the carbon-footprint guilt, if you will. This also allows customers to try before they buy, while enabling thredUP to get more items into customers’ hands, leading to yet more sales. See how this service also happens to neatly solve a business problem for the company?

The result is that thredUP’s customers not only get to feel good about their fashion choices; they can be part of the solution to a major environmental problem, or even early adopters of a movement that seems poised to overtake fast fashion in the future as more shoppers think secondhand first.“ThredUP intends to find a home for every item that comes in through our closet cleanout kits,” the company’s cofounder and chief technology officer explained to Forbes magazine. “Whether that is a resale to another eco-conscious or budget-inclined customer, resale to physical thrift stores, donations to charity, or having items recycled into other textile forms, our goal is to keep those items out of landfills entirely.”

ThredUP also partners with major retailers, including Macy’s, JCPenney, Madewell, even Walmart through its Resale-as-a-Service platform. It’s a way for these retailers to participate in the sustainability trend, although it’s by no means enough to turn these companies into community models for like-minded customers looking to avoid polluting the environment. Sustainability is not a material part of the equation for most retailers, but offering their customers the option to buy secondhand is certainly a start.

Contributed to Branding Strategy Insider by: Joel Bines and excerpted from his book The Metail Economy: 6 Strategies for Transforming Your Business to Thrive in the Me-Centric Consumer Revolution (McGraw Hill)

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1. Best Sellers

Imagine that you walk into a large bookstore without a clear idea of the book you want to purchase. You could spend hours aimlessly walking down the aisles of books or you could head straight to the displays that say, “Best Sellers.” If you choose one of those books, you are defaulting to the mentality of “that many buyers can’t be wrong.”

My colleague, Janet, explained her experience with a bestseller. Janet and her husband had just replaced the back patio door and wanted to upgrade their windowing covering. They decided to go with custom curtains. When the window covering representative sat down with Janet to go over fabric options, the representative made a comment that one fabric in particular was a bestseller among home designers. From that moment on, Janet was only interested in that “bestselling” fabric and chose not to look at the other options.

Products or services marked as “Most Popular” have the same effect because in essence, it is the same message: everyone else is buying it, so it must be great.

From a business perspective, notating the most popular or best-selling products or services will invoke FOMO because we don’t want to be left out. It will also create a sense of confidence in making a purchase decision because if something is in high demand it must be good. By labeling something as “bestselling” or “most popular”, you’re giving that product a special stamp of approval.

2. Back In Stock

Showing that a product is now back in stock implies that it is popular and has sold out before. This is a simple and very popular tactic because all it requires is you to display when a product is back available for purchase again. Some companies even send out email reminders, such as UNIQLO, Uggs, and Williams-Sonoma to let customers know the news.

3. Number Of Items Left

Why does the “Only 1 left” statement on the product page motivate people to urgently make a purchase? Even if an item is not scarce, showing low levels of inventory, such as “only three left” triggers the same effect as scarcity. One study tested this theory by tracking sales of 35,000 print books on a large e-commerce site. For each product page, basic information such as price, rating, date of product launch and sales rank were listed. Additionally, the pages included a scarcity message showing the available stock and a dispatch cut-off time (i.e. “order within the next n hours to get the good tomorrow”). After two weeks of tracking and later analyzing the data, the research team concluded that adding a scarcity message indicating the amount of units left prompted sales, but mainly when the customers were further down the purchase process. This means they had moved from causal browsing to more intentional shopping. This demonstrates an opportunity for businesses that either offer sales in the online space or promote products or services on their websites. Indicating how many units are left can promote higher sales, but make sure the statement is true and accurate.

Outside of the retail world, popular demand has worked well for service-oriented businesses. Simple statements on websites that show how many clients have been served or the companies that have become clients all elicit a perception of popularity. Even more than that, though, salespeople who make comments such as, “we are only taking on two more clients,” activate demand-related scarcity and a fear of missing out.

Booking.com continues to be a great example of how to use this type of limited-availability scarcity. When this multi-billion-dollar company first included information about the limited number of rooms available at each hotel for a certain price, reservations went through the roof. The number jumped so significantly that the customer service team that it was a system error. However, it was the powerful effect of scarcity that had caused bookings to skyrocket. When customers could see the limited opportunity to purchase the room at the low advertised price, it caused a sense of urgency.

Note: similar to showing how many items are left, another approach in high demand scarcity is to show the number of items sold. For example, a website might show how many times a hotel has been booked that day or how many units of a product have already been sold.

4. Waitlist

A waitlist is not only an indication that a product is in high demand, but also an opportunity for a consumer to still get the hot product…they just have to be patient. In 2003, Banana Republic heavily promoted a $198 jacket, which created demand. However, the retailer then limited the shipments to about half of the normal run, creating a flood of waitlists. There are many more examples of companies using waitlists to signal high demand, including car companies, golf clubs, private schools, apartment complexes, and other non-retailer organizations. Robinhood, the zero-commission stock trading app, had a waitlist of nearly one million people a year before it launched. Robinhood took the waitlist approach again in 2018 and announced a waitlist for commission-free cryptocurrency trading. Within one day, the list grew to over 1,250,000 people.

If all of these companies and industries can successfully signal high demand among products and services, why not create a waitlist prior to launch and do the same? Let customers know that there is a good possibility of the product or service running out (again) based on demand. Or depending on the release date, simply communicate that those on the waitlist get the product or service before everyone else.

As we have learned, demand-related scarcity can serve a business well because it indicates competition and social acceptance and results in a perceived higher product value than an item that is not in high demand. By communicating sales restrictions, bestsellers, back-in-stock products, and current items left or creating a waitlist, a business can ignite the behaviors that result from scarcity.

Key Selling Points

• When an item is scarce because of high demand versus other circumstances (like limited supply or time), the perceived value is even stronger.
• This form of scarcity creates a feeling of urgency, based on the belief that once the products are sold out, the chance to own the product is gone forever.
• Demand-related scarcity can occur when businesses produce inadequate product quantities to meet demand, as well as when businesses distribute a competitive number of products to retail stores.
• Scarcity due to high demand propels us to do something immediately.
• Demand-related scarcity appeals indicate competition and social acceptance, as well as product value
• Scarcity that is caused by demand entices people who want to feel included and/or identify with a certain group.

Contributed to Branding Strategy Insider by: Mindy Weinstein, Author of The Power of Scarcity: Leveraging Urgency and Demand to Influence Customer Decisions (McGraw Hill, November 2022).

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Not surprisingly, then, many retailers are tightening up their policies. REI and L.L.Bean have replaced their famous lifetime guarantees with stricter limits. Most companies give consumers thirty days to return their purchases, with the expectation that shorter policies will reduce costs and increase profit.

Intuitively, this makes sense. The longer it’s been, the harder products become to sell. Clothes go out of fashion and technology gets outdated. So shorter return periods should lead to fewer returns, and the goods that do come back should be in better condition and easier to resell.

But some research suggests this might be shortsighted. Two marketing researchers ran an experiment in which different groups of consumers randomly received different return policies. For the strict policy group, only defective products or incorrect shipments could be returned. For the lenient policy group, any product could be returned at any time for any reason.

Contrary to intuition, the less restrictive policy actually increased profits. Not by just a little, but by 20 percent.

Because the lenient policy didn’t just increase returns, it also increased sales, and word of mouth. And these increases were more than enough to offset the cost of the extra returned merchandise. Applied to the company’s full base of customers, the lenient policy would have increased profits by more than $10 million a year.

Just like reducing up-front costs, shrinking back-end friction encourages action. Like free shipping and free trials, lenient return policies help change minds because they reduce people’s hesitation about trying something new. Knowing you can return something anytime helps de-risk the process and makes people more comfortable taking action.

Zappos doesn’t just offer free shipping; they pair it with free returns. If people don’t like what they ordered, they end up no worse than when they started.

Money-back guarantees or pay-for-performance contracts work similarly. “Don’t like it? We’ll fix it.” Some lawyers advertise that they don’t get paid if the client doesn’t win. Even airline tickets are covered by a twenty-four-hour return policy. All of which lower uncertainty, encouraging customers to change their minds from no to yes.

Contributed to Branding Strategy Insider by: Jonah Berger. Excerpted from his book: The Catalyst: How To Change Anyone’s Mind

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It was always worth the trip to the store, purely because of the staff’s encyclopedic knowledge of all things hardware and the store’s incredible range of products. I could always trust I would get exactly what I needed when I needed it. Despite the ease of ordering something from my armchair on Amazon or the illusion of saving money at a hardware superstore, by not getting it right the first time without Elliott’s onsite expertise, I’d often buy the wrong thing and have to return it, so having this shop as my go-to was a no-brainer.

The Category Expert Defined

Elliott’s is a terrific example of the “category expert.” The category expert model of retail is based on being the most knowledgeable and the best stocked with a range of anything customers can possibly need in a specific realm—in this case, the realm of home improvement. McGuckin Hardware in Boulder, Colorado, is another example of a business that has become a destination for the depth of associate expertise, along with a vast array of products.

In fact, McGuckin, with 60,000 square feet of sales floor, selling more than 200,000 items, with 250 associates serving customers in 18 different departments, from garden and housewares to plumbing and automotive, has been able to carry the model over into a much larger assortment than that of Elliott’s or your typical hardware store.

Like many successful category experts, McGuckin started small when in 1955 Llewellyn Commodore “Bill” McGuckin, a rugged mountain man, set up shop with four people running four departments. As the store’s website states, old Bill was a firm believer in “personalized service, selection, and first-hand experience”—a philosophy he drummed into his son-in-law, Dave Hight, who became his partner in the store as the two men built it.

Understanding that category expertise cannot reside within just a handful of people, nor can it be contained within a single generation, McGuckin continually scoured the region for talent and experience. Today, each store department has a “green vest”: a category expert who walks the aisles. These individuals are approachable and friendly, always ready to help and advise consumers wandering the Grilling and Outdoor Living department, for example, who look like they might be overwhelmed about how to open, much less use, the Big Green Egg.

McGuckin also offers courses, empowering its customers to become their own experts and build it themselves, whether that’s a birdhouse, a composting system, or an outdoor kitchen. Elliott’s also teaches its customers the basics through online and in-store classes.

In fact, Elliott’s has one of my favorite online classes of all time: Toilets 101. The point is, the company manifests its category expertise in all the ways one might want to interact with a category expert—through the products, to be sure, but also the sense that I, too, can obtain a certain level of expertise.

The Edges Of The Bell Curve

Make no mistake. Elliott’s—which has five locations in the Dallas Metroplex in 2021—is no Home Depot or Lowe’s, and neither is McGuckin. Unlike the big-box category killers, which sell the most commonly sought items, the true category experts work around the edges of the bell curve, providing specialty items that most volume sellers do not. They sell the core products as well, but their advantage is gained on the margin. It’s not enough to have everything in a given category. They must also know everything about their category. And for that one-in-a-million question that stumps them, they must know where to find the answer.

The challenges of getting this right means that this strategy is not for everyone. In fact, among the six strategies outlined in my book The Metail Economy, it’s probably going to be the least popular, at least in its purest form. From sporting goods to electronics to beauty products, the category expert model of Metail enables significant flexibility, but it also requires focused investment only on the things that represent expertise to your customers. Stray too far, and your customers will not believe you. For this strategy, you need to have knowledgeable store associates, access to product information, and installation and repair assistance—not as an afterthought or through an outsourced partner, but as a built-in part of company culture. These are areas that demonstrate expertise to customers. This also means that it is difficult to do beyond a certain range of related products. It’s one thing to trust McGuckin for plumbing supplies, outdoor grills, pool supplies, auto parts, and such. But what about computers? Or drones? Or artisanal coffee beans? Probably not.

For this reason, differentiating on category expertise is somewhat limiting, at least under the same company banner. There’s nothing to prevent a true believer in category expertise from opening a range of companies, all of which would be category experts in their own right. But again, don’t push it and risk stretching your customer’s credulity.

This strategy also requires the most investment in frontline associates and inventory that may not sell very often. You need to invest more resources into your frontline associates and store management because it is their intellectual capital and skill sets, oftentimes more than the actual merchandise you are selling, that is attracting and keeping your consumers. The internet also makes it much harder to be a category expert because information and products can be sourced from countless sites. However, there is still no YouTube video that can compete with a live demonstration of how something should work when you’re truly stuck. Your business must be the first place consumers think of when they have a problem that needs to be solved. Your customers need to have a sense of urgency to getup off their couches and visit you.

Winning With Local Expertise

Though most of us may never set foot in one, try to conjure an image of your typical neighborhood skateboard shop. They tend to be owned and staffed by individuals who live and breathe the skater lifestyle. Their customers tend to be fellow boarders in the neighborhood who already know a lot.

Average consumers would be terrified of walking into one of these places, fearing they’d be made fun of by the cool kids. That’s why we haven’t seen a national chain of skater category experts. They possess a local expertise that attracts a finite number of customers (the skateboard set), but that set is also disdainful of people who do not live the lifestyle; so extend a skate shop brand too far, and your customers will no longer find you credible.

Contributed to Branding Strategy Insider by: Joel Bines and excerpted from his book The Metail Economy: 6 Strategies for Transforming Your Business to Thrive in the Me-Centric Consumer Revolution (McGraw Hill)

At The Blake Project we are helping clients from around the world, in all stages of development, redefine and articulate what makes them competitive at critical moments of change through our in-person or online strategy workshops. Please email us for more.

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The answer is that each of these retailers raised customers’ expectations in at least one key dimension of value: Walmart focused on low cost. Amazon looked to convenience. Warby Parker offered hip, branded eyewear to millennials. And Sephora strived to provide a superior in-store customer experience. Each, then, became the market leader to targeted segments of customers and has enjoyed enormous success.

But in today’s competitive world of retailing, keeping a leadership position based on only one aspect of customer value—one area of excellence—is not sufficient. That’s why each of these companies has also leveraged its inherent advantage in one dimension and offered excellence on a second dimension.

Today, Amazon not only offers convenience in shopping but also guarantees very low prices. Building on its operational excellence and guaranteed lowest price strategy, Walmart purchased Jet.com to build up Walmart.com and provide a better omnichannel experience. Warby Parker eliminated the middleman to offer eyeglasses directly to the end user, providing significant cost savings. Sephora built a huge loyalty program that combines in-store and online shopping behavior to provide a personalized, convenient experience for each of its customers.

These retailers offer individual examples of successful strategies. To generalize these successful approaches so any retailer can map out a strategic plan, I built a framework flexible enough to use across different retailing verticals and different customer segments. Because of the framework’s origins on basic assumptions, the strategic implications generalize beyond retailing to other industries.

Mapping Successful Retail Strategies: The Kahn Retailing Success Matrix

Most classic frameworks of retail strategy are missing a critical dimension: the customer perspective. It is a significant and startling omission.

After all, when customers go shopping, they want to buy something they value (product benefits) from someone they trust (customer experience). More than ever, this idea of trust is critical. Customers demand that retailers and brands offer value to society and that their business practices not be exploitative or deceptive. Providing genuine value will result in long-term customer loyalty.

Customers have lots of choices, and they gravitate to the retailers that offer them the best value on the dimensions they care about. In other words, retailers have to provide some kind of superior competitive advantage beyond what is being offered by the competition. This superior value can be delivered either by providing a more trustworthy or pleasurable experience or by removing pain and inconvenience from the retail experience.

These two ideas result in the simple 2 × 2 matrix pictured above that is surprisingly effective at categorizing the most successful retailing strategies today. The framework is very flexible and is therefore relevant across different verticals. Plotting strategy on this framework also provides a mechanism to measure progress at delivering this value relative to customers’ expectations and competitors’ actions.

The “Retail Proposition,” the horizontal axis of this 2 × 2 matrix, represents the first principle: Customers want to buy something they want (product benefits) from someone they trust (customer experience). “Superior Competitive Advantage,” the vertical axis, represents the second principle: In order to win customers, retailers must offer products and experiences that are better than the competition.

This matrix spells out four basic strategies. The first two strategies, illustrated on the top row, differentiate themselves by providing a more trustworthy relationship with the consumer and by providing more pleasure and more benefits; the second two strategies, illustrated on the bottom row, differentiate by eliminating pain points.

Contributed to Branding Strategy Insider by: Barbara E. Kahn, Professor of Marketing at Wharton. Excerpted from her book The Shopping Revolution.

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